What Is Inflation?
The term inflation refers to a drop in purchasing power because of a rise in prices over a certain period of time. When inflation is high, a single unit of currency doesn’t go nearly as far as it originally did. In fact, it buys less than it did previously.
What Causes Inflation?
There may be several factors that drive inflation. They include an increase in production costs (cost-push inflation), an increase in the demand for goods and services (demand-pull inflation), and fiscal policy.
The Bottom Line
Inflation will always be with us—that’s just an economic fact of life. While it may not intrinsically be good or bad, it certainly does impact the investing environment.